Building Defects in NSW: When Alternative Dispute Resolution Fails, What Next?

Meet Health with a strata law issue or a building in construction matter. Saks Jirachi Lawyers is a leading Sydney law firm that can help. With over 20 years experience, Saks Jirachi Lawyers focus on commercial litigation, building and construction, strata law and local government regulation issues. Now, here is your podcast. Welcome to the Strata Law Podcast. In this episode, we're talking about an issue that affects countless property owners across New South Wales. Building defects and what happens when disputes can't be resolved outside of court. Joining me is Anne Fernando, partner at Saks Jirachi Lawyers and expert in strata and construction law who breaks down everything you need to know if you're facing building defect problems. Anne discusses the limitation periods under the Home Building Act when the clock runs out on making a claim. The difference between major defects and minor defects and why the classification matters, who you can actually sue, be it the builder, developer or both and in what circumstances, which court or tribunal has jurisdiction depending on the value of the claim and the obligations of owners' corporations under the Strata Scheme's Management Act. Whether you're an individual home owner or part of an owner's corporation, this episode will give you practical guidance on protecting your rights and understanding the legal pathways available when things go wrong with your building. Anne, you've previously spoken about alternative dispute resolution methods that can be taken when building defects come up. What happens if a resolution cannot be reached and you need to commence legal proceedings? Well, Dan, the most critical issue if you discover a building defect is to think about what the relevant limitation period is. So a limitation period is the last day that you as an owner or an honest corporation can bring legal proceedings in relation to the building defects. And under the Home Building Act, whether it actually is a defect. So for something to be a defect, it has to be shown that there's a breach of the statutory warranties. Now those are set out in section 18B of the Home Building Act and they include things like a failure to comply with the law. So usually that's a failure to comply with the Building Code of Australia. And under the Home Building Act, there's a six year limitation period for major defects. A major defect is something like waterproofing, fire safety systems, in a load bearing component of the building and also cladding, then there's two years for all other defects. So something to keep in mind is that it's actually not completely straightforward to classify something as a major defect. So for example, it's not enough to say that it's a waterproofing defect, but you would also need to show that a defect causes or is likely to cause the inability to use the building or the part of the building for its intended purpose. How do you actually calculate the last day to bring legal proceedings? Well, first you need to know what the date of completion of the residential building work is. That's because the Home Building Act only applies to residential building work. And the date of completion differs for a strata scheme or a house. So it's much more straightforward for new buildings in strata schemes because the completion date happens on the date of the issue of an occupation certificate and that an occupation certificate will authorise the occupation and use of the whole of the building. So I mean, that's important because in strata schemes it wouldn't count if it only authorised use of part of the building. And for all other residential premises, then there's a different date of completion. So the date of completion actually occurs on the date that the work is complete within the meaning of the building contract under which the work was done. So if that building contract doesn't actually set out a date of completion, the completion date of the work is set to occur on the date of practical completion. Now, and given that there may be lots of parties involved, how do you actually know who to sue? Yeah, I mean, that's a good question because under the Home Building Act, you can generally whether you're in a strata scheme or whether you're in a house, you can sue the builder the breaches of statutory warranties, I spoke about before, like the failure to comply with law. But if you're a homeowner, you can't always bring proceedings against the developer. Now, generally, an owner's corporation can bring proceedings against the developer because it's only in and I'll go through the two circumstances where you can do that. So that's where the work's done in connection with an existing or proposed dwelling in a building or some kind of residential development where four or more of the existing or proposed dwellings will be owned by the developer or otherwise where it's done in connection with a retirement village or disabled accommodation where all of the units will or are or will be owned by the developer. So generally, for most owners' corporations, they'll fall within that so they can bring proceedings against but the builder and the developer, but for instance, if you just own a home, then you could only sue the builder under the home building act. And how do you know where to commence legal proceedings? So the NSFL Civil and Administrative Tribunal has a jurisdictional limit of $500,000. So that's as a starting point, you have to know what the value of the cost of rectification of the building defects is. So if it's $500,000, you would commence in NCAT, the Tribunal. If it's up to $1.25 million, then you would start your proceedings in the district court and anything higher than that, you can start in the Supreme Court. Now, if you have no idea at all what the value is of the rectification of defects, usually the Tribunal is the best place to commence the proceedings, you can always transfer it to a different jurisdiction if you find out along the way that actually the value of the defects is much higher than you thought it was. And generally, you can do that by putting on an affidavit, with putting on some evidence from a quantity surveyor about the cost of rectification of the defects. In this context, Anne, is there anything owners' corporations should keep in mind? Well, an owners' corporation should keep in mind that they have an obligation under Section 106 of the Strait of Skills Management Act to keep in a state of good and serviceable repair the common property. So if they're building defects, that would technically mean that the owners' corporations actually in breach of that section. But where the owners' corporations commence legal proceedings against a builder or a developer, then it can actually differ compliance with that section. And what may also happen is a lot of these times owners will commence proceedings against the owners' corporation because they're suffering damage to their lot. And maybe they can't live there, for instance, if it's rewarding in Greece. And so for an owner's corporation, if a lot owner commences proceedings against them for something like that, then they can also try and have that proceeding her together with the proceedings against the builder and the developer. In this context, Anne, how can sector Archie Lawyers help? Well, we run these claims on a regular basis, so we're happy to assist owners and owners' corporation, first of all, by providing advice in relation to the limitation period when you have to commence legal proceedings, who you should commence legal proceedings against and exactly what kind of defects can be claimed. Anne, thanks for joining me. Thanks very much, Dan. Thanks for listening. If you have any questions or need more information, simply call sacksgerarchie on 02-9331-51-27.